At the application phase with your lender, the government requires your lender to give you a “Good Faith Estimate” (GFE) within three days. This document discloses all the costs to the mortgage. Experts agree, a Buyer should not commit to a loan before review of the GFE.
While the GFE is helpful to understand costs, it can be tricky to understand. The below are some of the costs mentioned in a GFE and a brief explanation of each:
Lender’s fees
The list includes the appraisal fee, credit report fee, application fee, mortgage broker’s fee, and interest rate lock-in fee, if any.
Interest rate and points
A GFE shows your interest rate and any discount points you can pay at closing. Ask about paying discount points which may buy you a lower interest rate and lower payments, but it will take many months before the savings make up for the fee.
Prepaid interest
One item paid in advance is the interest on the loan for the period before the first payment date. Assigning your closing date towards the end of the month can minimize this charge.
Title and transfer charges
The closing or escrow fee, title search and title insurance fees, and government taxes are fairly standard. The one way to lower these rates would be something called a reissue rate on the title insurance. If it has been less than five years since the previous owner took out a policy on the property, you might get catch a lucky break. You may use your own title insurance contact or the lenders. You decide.
Fees may rise
Keep in mind, a GFE is only an estimate. There have been recent developments regarding the accuracy of these quotes binding the lender to stricter rules. Regardless, it would be important to re-visit these fees a second and third time on the road to closing.
Insurance
A GFE will usually show pricing for home or hazard insurance but it may be less expensive to arrange your own. Also, if you are being charged for mortgage insurance or flood insurance make sure you know why.
Fee lock-in
You might consider an option to protect yourself from nasty surprises by asking your lender to quote exact final costs, or “lock in” its fees. Or you can look for one of the “bundled” fee packages now offered by some lenders — these might offer a cheaper overall price.
Truth in Lending Statement
The Truth in Lending (TIL) disclosure form gives you the Annual Percentage Rate (APR) on your mortgage, which takes into account discount points, mortgage insurance, and other fees on top of the basic interest rate.
It lists the total finance fees, the amount financed, the total amount you’ll pay over the life of the loan, the total number and amount of your payments, and when they’re due each month, whether the mortgage is assumable if you sell the home, and whether there is a penalty for prepaying the mortgage; if the form says you “may” have to pay a penalty, it means you probably will.
Most important, understand that the figures in the TIL form can also change. If your interest rate or any of the fees go up by closing day, so will your APR and the overall cost of your loan.
The above information should now give you an understanding of the terms and issues that will impact your cash. Once completed, it will be much easier to determine the correct price range for your eventual purchase. Good luck Buyers !!! Now is the best time to buy.
Call Rodd Sheradsky P.A. for a selection of homes for sale in Weston, Davie, Fort Lauderdale, Las Olas, and any oceanfront property.